Shifting Debt to Tax Deductible

Available to homeowners is the Mortgage Interest Deduction for up to $1,000,000 of acquisition debt on both their first and second home. If they have Home Equity debt they can also deduct shifting debt to tax deductibleinterest on up to an additional $100,000.

Home Equity Debt can be used for any purpose such as educational or medical expenses, buying a personal car or boat, or consolidating and paying off credit cards, while Acquisition Debt is used to buy, build or improve a principal residence.

Homeowners with homes for sale in Northern Virginia and sufficient equity in their home could replace a credit card with $15,000 debt at 19%  interest with a home equity loan at a much lower interest rate. Now the interest rate gained by the equity loan becomes about 1/3 of the credit card rate and it is tax deductible. You read right, Tax Deductible.

If the taxpayer was in the 28% bracket, the net interest on a 6.5% loan would be 4.68% after tax benefits are considered.

By shifting personal debt to Home Equity debt, a homeowner will get an interest deduction and probably, a lower interest rate. Homeowners with homes for sale in Northern Virginia can earn a net savings by shifting away from higher credit card debt.

For more information, see IRS Publication 936 page 10 and consult your tax professional.

However if you need to sell your primary or secondary residence rather than take on a home equity loan, contact me about my marketing plan and let’s get it sold. Need a new home? We can review homes for sale in Northern Virginia and find your dream home.

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